QPR SOFTWARE PLC STOCK EXCHANGE BULLETIN 28 April 2004, AT 11.00 AM QPR SOFTWARE PLC INTERIM REPORT JANUARY 1 ? MARCH 31, 2004 1-3/2004 1-3/2003 Net Sales, MEUR 1.409 (1.773) -20.5% Operating Result, MEUR 0.125 (0.218) -42.5% Profit before taxes, MEUR 0.132 (0.053) +148.1% -percent of Net Sales 9.4% (3.0%) Net Result, MEUR 0.109 (0.048) +125.4% -percent of Net Sales 7.7% (2.7%) Liquid Assets, MEUR 0.629 (0.245) +156.7% Earning per Share, EUR 0.01 (0.00) Equity per Share, EUR 0.09 (-0.04) Equity Ratio 27.7% (-9.4%) Return on Investment 19.6% (50.7%) The net sales of the software business increased 4.8% during the review period compared to the corresponding period of the previous year and was MEUR 1.409 (MEUR 1.346). The development of the software business was based in particular on the increase of sales via the global distribution channel. The share of international operations of the Group?s turnover for the review period was 71% (56%). The Group widely reached the objectives set for the business for the review period. Based on e.g. developments materialised in the business, the understanding of the Board of Directors is that the preconditions exist for the Group to reach the previously stated estimates of the volume and profitability of the business in the whole of year 2004. DEVELOPMENT OF OPERATIONS The Group?s net sales and operating result developed as anticipated. The net sales of the Group for the first quarter decreased 20.5% compared to the corresponding period of the previous year and was MEUR 1.409 (MEUR 1.773). The decrease was due to the accomplished divestment of the business games operations in year 2003. The operating profit for the Group?s first quarter was MEUR 0.125 (MEUR 0.218), which was 8.9% (12.3%) of turnover. The net result of the Group increased 125.4% compared to the corresponding period of the previous year and was MEUR 0.109 (MEUR 0.048), which was 7.7% (2.7%) of turnover. The earning per share was EUR 0.01. End user sales (software business less initial partner payments) was MEUR 1.392 and increased 18.7% compared to the corresponding quarter of the previous year. Out of end user sales, software license sales were MEUR 0.847, in which there was an increase of 19.1% compared to the corresponding quarter of the previous year. The concentration of the QPR Group on software business activities and the investments in global distribution channels continued during the review period, and co-operation with the key distributors was expanded and intensified. Sales development accomplished in cooperation with the local distributors resulted in important openings into larger size customer organisations e.g. in South Africa and New Zealand. During the review period 84% (62%) of the license sales, MEUR 0.711, accumulated via the global distribution channel, where growth amounted to 61% compared to the corresponding period of the previous year. The turnover of the Group?s software business was divided as follows during the review period, MEUR: 1-3/2004 1-3/2003 Software licenses 0.847 (0.711) +19.1% Initial partner payments 0.017 (0.173) -90.2% Maintenance services 0.391 (0.390) +0.3% Professional services 0.154 (0.071) +116.5% Software business in total 1.409 (1.346) +4.8% PRODUCT DEVELOPMENT The Groups?s R&D costs for the review period increased 15.9% compared to the corresponding period of the previous year and totaled MEUR 0.277 (MEUR 0.239), that is, 19.6% (13.5%) of turnover. In accordance with the plans, the major R&D effort during the review period was the revision and release of the new 7.2 product version. No overhead costs have been included in the R&D costs, neither have any R&D costs been capitalized in the balance sheet. In March 2004 QPR launched a new release of the QPR Collaborative Management Software. QPR 7.2 supports the implementation of collaborative management in private and public sector organisations. The new software release enables to link the dynamic multi-level strategy maps and core processes of the organisation. The new integration capabilities and automation of software functions support in particular deliveries of large-scale management systems and rapid implementation. QPR 7.2 is interactive software that combines strategic management (QPR ScoreCard) and process management (QPR ProcessGuide) into one complete solution for Collaborative Management. With the help of QPR 7.2, organisations support their people?s commitment to organisation?s objectives and processes. QPR 7.2 has been well received on the markets. During the first month more than 100 user organisations have started upgrading their QPR solutions to the new version 7.2. QPR?s software has been translated into 20 different languages. PERSONNEL At the end of the review period the Group employed a total of 41 people (52), all of who are working in the software business. The number of employees was same in the beginning and in the end of the review period. For incentive and commitment purposes, the Group has personnel bonus scheme and stock option plan covering the whole personnel. The subscription periods of stock option plan are scaled to begin in 30.9.2004 and 30.9.2005. FINANCING, INVESTMENT AND CHANGES IN EQUITY At the end of the review period, the Group?s equity was MEUR 1.520 (MEUR 0.037), and the Group?s equity ratio was 27.7% (-9.4%) correspondingly. At the end of the review period, the Group?s liquid cash funds were MEUR 0.629 MEUR (0.245). The Group?s investments in fixed assets during the review period were MEUR ?0.014 (MEUR 0.014), i.e. ?1.0% (0.8%) of turnover. The equity of the parent company QPR Software Plc totaled MEUR 2.249, of which MEUR 1.304 share capital. During the review period, the Group?s liquidity has further improved. At the end of the review period, liquid cash funds amounted to MEUR 0.629 (MEUR 0.245). Current assets less MEUR 0.743 long-term receivables amounted to MEUR 3.075, short-term liabilities amounted to MEUR 2.601 and deferred revenue amounted to MEUR 0.873. Thus the Quick Ratio key figure at the end of the review period was 1.78. The liquidity prognosis indicates that the Group?s cash funds will be sufficient for the next 12 months, and the liquidity situation is estimated to improve further during that time. Factors contributing to the improvement in liquidity are improvement in the profitability of the Group?s business operations, and installments from the sale of Business Games operation during the rest of the fiscal period (estimated MEUR 0.4). During the review period, new shares were subscribed with stock options in March 2004. This served to increase share capital by MEUR 0.047 and the Company?s equity by MEUR 0.179. During the review period no new subordinated loans were drawn. DECISIONS MADE BY THE ANNUAL SHAREHOLDERS? MEETING The Annual Shareholders? Meeting held on March 8, 2004 adopted QPR Software Plc?s financial statements and the consolidated statements and granted the members of the Board of Directors and the Managing Directors discharge from liability for the financial year ended December 31, 2003. The Annual Shareholders? Meeting resolved that no dividend shall be distributed for the fiscal year 2003. The Annual Shareholders? Meeting decided to use Company?s Share Premium Fund in order to cover the retained losses of EUR 3,132,471 from the previous accounting periods. The Annual Shareholders? Meeting resolved that the Board of Directors consists of five (5) ordinary members. The Annual Meeting re-elected the following members to the Board of Directors: Timo Tirkkonen, Vesa-Pekka Leskinen, Teemu Malmi and Asko Piekkola, and elected Jane Moilanen as a new member to the Board of Directors. The Board of Directors elected Timo Tirkkonen to continue as Chairman of the Board. Ernst & Young Oy, Authorised Public Accountants, continues as QPR Software Plc?s auditors, with Rauno Sipil?, Authorized Public Accountant, as the auditor with primary responsibility. The Annual Shareholders? Meeting authorised, by revoking the previous unused authorisations, the Board of Directors to decide on increase of the share capital, until March 8, 2005, through one or more new issues and/or on one or more convertible bonds and/or granting option rights in one or more installments. The authorisation is for the maximum amount of EUR 251,300. On the basis of the authorization, the number of company shares in circulation may increase at maximum by 2,284,545 shares totaling in 14,135,901 shares. OTHER EVENTS DURING THE REVIEW PERIOD The 650,000 shares subscribed on stock option rights as part of the Stock Option Plan 2003/I and the 400,000 shares subscribed in the targeted share issue entered public trading on the Helsinki Stock Exchange New Market list together with old shares as of 14 January 2004. The share of QPR Software Plc was removed from the surveillance list by the decision of Helsinki Stock Exchange on 29 January 2004. The 425,000 shares subscribed by 10 March 2004 under the Stock Option Plan 2003/I entered public trading on the Helsinki Stock Exchange New Market list together with old shares as of 19 March 2004. The number of shares available for trading thus rose to 11,851,356. The number of shares can no more increase by stock options under the Stock Option Plan 2003/I. CORPORATE GOVERNANCE The Company has during the review period gradually adopted the Recommendation on Corporate Governance published by the Helsinki Stock Exchange in December 2003. The Recommendation will be fully implemented in the Company for all applicable parts on July 1, 2004, when the Recommendation enters into force. ADOPTION OF IFRS STANDARDS Preparations for the adoption of IFRS-standards (International Financial Reporting Standards) were initiated at QPR Software Plc during the year 2003 and will continue during the year 2004. The Company will report in accordance with the IFRS during 2005. The effect of the adoption of IFRS to the Company?s accounting principles will be assessed during the year 2004. COMPANY OWNERSHIP AND TRADING IN COMPANY SHARES At the end of the review period the Company had a total of 713 shareholders. The number of shareholders increased during the review period by 114 shareholders, or 19%. In the review period trading in company shares amounted to MEUR 1.181, i.e. an average of EUR 18,747 per trading day. Trading in shares totaled 1,863,644 shares, giving an average of 29,582 shares per trading day. Turnover in shares corresponds to 15.7% of the total shares and the average price was EUR 0.63 per share. The market value of the shares at the end of the review period was EUR 0.53 per share, totaling MEUR 6.281. The number of shares issued by QPR Software Plc at the end of the review period and at the time of review was 11,851,356. In addition to this the Company has issued stock option rights to Board members, management and key personnel, which entitle the holders to subscribe 590,000 new shares. Stock option rights are also in the possession of the subsidiary to be given to present and future employees and management, which would entitle holders to subscribe a maximum of 188,198 shares. On the basis of the authorization given at the annual general meeting of 8 March 2004 the Board of Directors could further issue securities, which would increase the number of company shares in circulation at maximum by 2,284,545 shares. This authorization is in force until 8 March 2005. FUTURE PROSPECTS It is the conception of the Board of Directors that the estimates of Company?s turnover and profit given for the whole of 2004 needs not to be changed. The Board of Directors estimated on 28 January 2004 that the growth in the net sales of the QPR?s software business will for 2004 be on an annual level around 20-40%, and based on that anticipated the result of the Group to be distinctly positive. GROUP INCOME STATEMENT 1-3/04 1-3/03 1-12/03 (MEUR) change NET SALES 1.409 1.773 -21% 5.166 Other operating income 0.019 0.016 23% 1.327 Share of the results in associated companies -0.034 -0.002 1515% -0.144 Expenses 1.223 1.516 -19% 5.338 Depreciation according to plan 0.047 0.053 -12% 0.212 OPERATING PROFIT/LOSS 0.125 0.218 -42% 0.800 Net financial income and expenses 0.007 -0.164 104% -0.613 PROFIT BEFORE EXTRAORDINARY ITEMS 0.132 0.053 148% 0.188 Extraordinary earnings 0.000 0.000 0.540 Extraordinary expenses 0.000 0.000 0.000 PROFIT BEFORE TAXES 0.132 0.053 148% 0.727 Taxes -0.023 -0.005 371% -0.018 Minority interest 0.000 0.000 0.000 NET PROFIT/LOSS 0.109 0.048 125% 0.709 Earnings per share (EUR) 0.01 0.00 100% 0.02 Earnings per share after dilution effect 0.01 GROUP BALANCE SHEET 03/04 03/03 12/03 (MEUR) ASSETS FIXED ASSETS AND OTHER NON-CURRENT ASSETS 0.792 1.734 -54% 0.852 Intangible assets 0.279 0.426 -35% 0.301 Tangible assets 0.101 0.176 -42% 0.123 Investments in associated companies 0.407 1.127 -64% 0.424 Other investments 0.005 0.005 0% 0.005 CURRENT ASSETS 3.818 3.952 -3% 3.578 Deferred tax gain 0.517 0.000 100% 0.540 Long-term assets 0.679 0.888 -24% 0.681 Short-term receivables 1.993 2.820 -29% 1.947 Cash and cash equivalents 0.629 0.245 157% 0.410 TOTAL ASSETS 4.609 5.686 -19% 4.430 SHAREHOLDERS? EQUITY AND LIABILITIES SHAREHOLDERS? EQUITY 1.520 0.037 3968% 1.259 Share capital 1.304 1.141 14% 1.257 Other shareholders? equity -0.270 -1.590 83% -0.484 Subordinated loan 0.486 0.486 0% 0.486 MINORITY INTERESTS 0.000 0.000 0.000 LIABILITIES 3.090 5.649 -45% 3.171 Long-term liabilities 0.489 1.424 -66% 0.102 Short-term liabilities 2.601 4.225 -38% 3.069 TOTAL SHAREHOLDERS? EQUITY AND LIABILITIES 4.609 5.686 -19% 4.430 Shareholders? equity per share (Euro) 0.09 -0.04 0.07 Equity ratio 27.7% -9.4% 20.7% ROI 19.6% 50.7% 35.4% R&D expenditure (MEUR) 0.277 0.239 16% 1.085 Gross investments in non-current assets (MEUR) 0.003 0.014 -79% 0.098 Average number of 40 75 54 personnel Adjusted average number of shares in review period 12,048,586 10,376,356 10,413,753 Number of shares at the end of review period 11,851,356 10,376,356 11,426,356 Consolidated cash-flow for the review period and for the corresponding period in the previous year (MEUR): 1-3/04 1-3/03 1-12/03 CASH-FLOW FROM OPERATING ACTIVITIES EBIT 0.125 0.218 0.800 Depreciation according to plan 0.047 0.053 0.212 Other income and expenses that include no payment -0.044 -0.146 0.099 Net financial income 0.007 -0.164 -0.613 Incidental revenue and expense 0.000 0.000 0.540 Taxes 0.000 -0.005 -0.018 Net change in interest- free receivables 0.413 0.999 1.176 Net change in interest- free loans -0.276 -0.820 -1.859 Net change in long-term receivables and debts 0.002 0.014 -0.959 Net cash-flow from operating activities 0.274 0.148 -0.623 CASH-FLOW FROM INVESTING ACTIVITIES Capital expenditure 0.000 0.001 0.020 Investment in associated companies 0.000 0.000 -0.109 Purchase of investments 0.000 0.000 0.693 Proceeds from sale of tangible/intangible assets -0.003 0.000 0.000 Proceeds from repayments of loans 0.000 0.000 0.000 Cash-flow from investing activities -0.003 0.001 0.604 CASH-FLOW FROM FINANCING ACTIVITIES Proceeds from long-term borrowings 0.000 0.000 0.000 Repayment of long-term borrowings -0.204 -0.206 -0.445 Net change in minority shares 0.000 0.000 0.000 Proceeds from convertible subordinated debentures 0.000 0.000 0.000 Proceeds from issuance of new shares 0.178 0.000 0.447 Dividends paid 0.000 0.000 0.000 Foreign exchange adjustments -0.027 0.032 0.156 Cash-flow from financing activities -0.052 -0.175 0.158 Net change in cash and cash equivalents (+) / (-) 0.219 -0.026 0.139 Cash and cash equivalents at beginning of period 0.410 0.270 0.270 Cash and cash equivalents at end of period 0.629 0.245 0.410 CONTINGENT LIABILITIES Securities for own commitments (MEUR) Mortgages for loans 1.325 1.325 1.325 The Group has no liabilities from derivatives. The interim report is unaudited. QPR SOFTWARE PLC Board of Directors Further information: QPR SOFTWARE PLC Mr. Matti Kanninen, Managing Director, tel. +358-40-545 5877 matti.kanninen@qpr.com http://www.qpr.com DISTRIBUTION: Helsinki Stock Exchange Main media Neither this press release nor any copy of it may be taken, transmitted into or distributed in the United States of America or its territories or possessions.